The paradox of plenty and the resource curse – the case of Ghana

By Issah Alhassan

“In the abundance of water, the fool is thirsty”- Bob Marley.

When Ghana first discovered oil at Cape Three Points a few years ago and was preparing to explore, one advice resonated from across the length and breadth of the country, and even from other oil rich countries across the world – “Ghana needs to manage its oil resources judiciously, so that it becomes a blessing rather than a curse.”

The fear was that other sister countries in Africa such as Nigeria and Angola, which are also naturally endowed with the “Black Gold,” as many would prefer to call it, have had bitter experiences in respect of the management of the resource.

Lots of rebel groups have sprang up, supposedly fighting to protect the interest of the local people on whose lands sit these rich resources. Lots of precious lives have been lost, while unquantifiable amounts of personal and public property have been damaged. The authorities of these countries, as we speak, are yet to find lasting solutions to the demands of these people, who have been described as ‘renegades’.

In Ghana, the chiefs and people of the Western Region made an initial demand of a 10% percent share from the oil revenue, arguing, whether justifiably or unjustifiably, that once the oil was discovered in the Western Region, they ought to be given preferential treatment in the distribution of its profits.

As usual, there had been some political promises, especially, by the current President, His Excellency John Mahama, in 2008, that if the National Democratic Congress (NDC) wins power, the wishes of Nananom would be given serious consideration, as far the oil resource was concerned.

And then the chicken finally came home to roost, after the victory of the NDC, Nananom, led by Awulae Annor Adjaye, started demanding their pound of flesh.

Experts warned the government to tread cautiously, especially after the initial posture by it that the chiefs and people of the Western Region had no right to make such demands, because the oil was situated offshore, which is essentially a no-man’s land.

The other argument was that if the people of the Western Region start demanding preferential treatment, then others like Ashanti, where gold and other natural resources are deposited, could also make similar demands. To some extent, the argument of the government, particularly, the present one, seemed fair and understandable, because all resources are for the people of Ghana and not one particular sect of people, irrespective of where it is located.

Experts like Dr. Steve Manteaw believe that Nananom in the Western Region did not present their case well, stressing that the chiefs could have argued that once the exploration was being done on the Western part of the sea, it will bring lots of people to the Western Region, and that will mean putting pressure on resources at the region’s disposal.

At the end of the day, Nananom bargained for a relatively better deal, thus the government agreed to construct the Western corridor roads, and provide other infrastructure for the people.

These issues are, however, not my concern, as it is just the tip of the iceberg. The real and disturbing issue is whether Ghana, as a nation, really bargained for better deals as far as the exploration of this mineral resource is concerned. This is not limited only to oil, but also gold, bauxite, manganese, cocoa, timber and forest, among others.

At a recent Media Capacity Building workshop organised by KASA, literally meaning ‘Speak Out’, a local advocacy and non-governmental organisation, on Natural Resources and Environmental Governance in Ghana, I was exposed to revelations that sent deep shivers down my spine. The revelations bordered  on the inconsistencies, the inaccuracies, and deliberate failure on the part of past and present administrations to enter into agreements or promulgate laws that will protect the interest of Ghana, and ensure that we reap maximum profits from the exploration of these mineral resources.

It further exposed how, as media personnel, we have not lived up to our watchdog role – to hold our leaders accountable for giving us such a raw deal, or to borrow from Martin Luther in his famous I-have-a-dream speech: “A cheque which has come back marked insufficient funds.”

Our leaders, deliberately or out of ignorance, entered into agreements or passed laws that ended up favouring the multi-nationals more than it benefited us. Perhaps, overwhelmed by the fact that Ghana had struck oil, we refused to do a thorough analysis and the necessary cost-benefit analysis, to determine to what extent such agreements could be beneficial to the average Ghanaian.

Dr. Manteaw, in his presentation on Oil and Gas Reporting, argued that there were lots of loopholes in the National Energy Policy, especially, the section dealing with petroleum, local content and indigenisation.

The Petroleum (Exploration and Production) Law, 1984 (PNDCL 84) provides the framework for the management of petroleum exploration, development and production in Ghana. (This will soon be replaced by a revised Petroleum Exploration and Production Law.)

There are, however, so many ambiguities and discretions which require serious attention and consideration. There is no clear cut definition on rental payments (s.18), as argued by Dr. Manteaw, the provision states that “as may be prescribed” leaving it at the discretion of individuals who will enter into negotiations.

The provisions in the Petroleum Revenue Management Law (PRML) are also not comprehensive enough to provide the needed guidelines, as to how funds accrued from the oil are to be utilised. – Both sections 19 and 20 deal with the payment of Corporate Tax and Royalties.

The former states that it should be in accordance with the laws of Ghana, whilst the latter states that it should be in accordance with the terms of a petroleum agreement.

This discretion, Dr. Manteaw contends, is the basis for the low royalty of Hess, and could provide opportunities for rent-seeking, especially in an opaque licensing process.

“Leaving too much to discretion can be dangerous. There is the need to have a regulation in place, setting out the rates of royalty payable, in respect of petroleum production,” the acting editor of the PUBLIC AGENDA argues.

It is instructive to note that Newmont Ghana Limited, for instance, does not pay property rate to the Asunafo District Assembly, according to the Ghana Extractive Industries Transparency Initiative (GHEITI) Report 2007.

AngloGold pays about GH¢400,000 as property rate annually to the Obuasi Municipal Assembly. If one knows how many schools such an amount can construct, then one could imagine the kind of money the Asunafo District is missing. The explanation is that it is part of the contractual agreement. Somebody out there thinks that the district does not deserve to benefit from any form of revenue from the mining company.

Natural Resources extraction, as we all know, comes with some environmental and social challenges which must be dealt with by the host country, and the challenge is how best to mitigate and manage the impacts.

The Environmental and Social Impact Assessment (ESIA), now known as Environmental Impact Assessment (EIA), provides the main instruments for mitigating and managing impacts. (Why the social aspect was taken out, still remains a matter of contention).

The ESIA or the EIA, however, does not adequately provide the needed solution to environmental impacts management. For instance, it does not address the issue of sea-use contestation.

On the benefit of management and sharing, the PRML sets up two funds: Heritage and Stabilisation, which marks a break from the past.

“Norway, one of the world’s largest petroleum exporters, invests its oil wealth across 42 different markets and 31 currencies, the equivalent of about $75,000 for every Norwegian. Its pension fund is Europe’s largest, and lags behind only that of the United Arab Emirates, among those run by governments,” posits Dr. Manteaw.

He further argues that other features that must interest the public and the media is the fact that there is no earmarking, collateralisation limited to annual budget funding amount, collateralisation of reserves prohibited, additional layer of public oversight, and no direct transfers to fringe communities.

Investigations have also proved that there is not enough safety to protect the enclaves of the Jubilee Field, in an unlikely event of oil spill. According to Dr. Manteaw, there is a global ban on the use of single hull for exploration, but in the case of the FPSO Nkrumah, not only is the hull single, but it is also second hand.

The hulls are layers that lie within the FPSO to protect oil from getting into the sea and destroying marine lives in an event of an oil spill. International standards demand the use of a double hull, but in our case, it is a latent problem waiting to happen.

“How much crude is being lifted, and how consistent is it with the fiscal terms or the production sharing agreement, what price is the oil being sold for, and how does it impact on government take and state revenue, these are issues that must interest us,” he contends.

 

The need for transparency and media involvement

Never has it become more necessary for the media to actively engage in the governance of Ghana’s natural resources than now. Transparency is a fundamental criterion for good governance, since one cannot hold to account, when one does not know what has been entrusted.

Foreign Direct Investment (FDI) in the oil, gas and mining industries is a significant source of revenue for governments of over 50 developing countries, yet 12 mineral-dependent and 6 oil-dependent states in the developing world became Highly Indebted Poor Countries (HIPC), with some of the world’s worst Human Development Indicators in the last decade.

Ghana, therefore, signed onto the Extractive Industry Transparency Initiative (EITI) in 2004 to protect the use of her mineral resources.

The EITI is a multi-stakeholder initiative, comprising governments, companies, and civil society. Its principles and criteria hinge on the regular PUBLICATION of all material oil, gas, and mining payments and receipts by companies and governments respectively, in a manner that is accessible to citizens, i.e. in a comprehensive, and comprehensible format.

The rationale, according to Dr. Manteaw, is that the availability of such information will bolster the bottom up demand for accountability, and therefore, ensure effective and efficient use of such revenues.

According to information, though Ghana has produced seven reports highlighting some minor discrepancies in between payments and receipts, and institutional lapses that lead to revenue leaks, misapplication of royalties disbursed to sub-national governments, etc.

The report further discovered several challenges, including delays in transfers of communities’ share of benefits inhibits planning – This is being addressed, transfers from regional OASL to districts not accompanied by advice, ground rent not collected and not paid.

Like the paradox, Ghana is endowed with lots of natural resources, but yet, the people are not reaping the needed benefits; “In the abundance of water, the fool is thirsty.”

In concluding my piece, I would like to reiterate Dr. Manteaw’s statement: “Citizens are key to the development processes in our country. After all, natural resources are held in trust for them. To hold duty-bearers to account, they require information. This is where the media’s role becomes critical. It will take a partnership between the media, civil society organisations (CSOs) and citizens to ensure that our resources and wealth become a blessing for all of us.”

*The title of this article was borrowed from Dr. Steve Manteaw, Acting Editor of the PUBLIC AGENDA Newspaper and Campaign Coordinator for ISODEC.

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